What 10 States Have the Lowest Income Taxes?

State income tax varies by state. Sometimes, people select a state of domicile or a job in that state because of the low income tax rate or absence of state income tax. Some states offer a higher exemption than others do, but the top nine states are definitely the most inexpensive. A look at the state sales tax and other taxes also helps to decide which state is really a tax haven.

Alaska

If you live in Alaska, you'll experience natural beauty, great fishing and no income taxes. To make the situation better, this state doesn't even have a sales tax.

Florida

There's a reason that seniors head for the sunshine state. They're smart. Florida has no state income tax. However, as of January 2010, they do have a 6 percent sales tax and a fuel tax almost twice as high as their neighboring state, Georgia.

Nevada

While the casinos might take your money, they also pay a large amount of tax. Because of that, there's no need for state income tax in Nevada. The sales tax is almost 7 percent as of January 2010. You can't complain when out of state trade pays much of that tax.

South Dakota

You can see Mount Rushmore daily and save on income tax too. There's none in this home of the Badlands. You'll only pay a 4 percent sales tax too.

Texas

You'll find great chili, cowboys and no state income tax in Texas. They have a 6.25 percent sales tax, but it's still a state offering a bargain on taxation.

Washington

Washington is the state where Starbucks started and one where you save on taxes. There is no state income tax in the state of Washington, and sales tax is 6.5 percent.

Wyoming

You can ski or visit Yellowstone Park with the extra money you'll save on state taxes. There is none in the state of Wyoming and only a 4 percent sales tax.

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New Hampshire

New Hampshire has a state tax but not income tax on W-2 wages. It assesses a tax of 5 percent on interest and dividend income. However, the amount must be more than $2,400 annually. If you're a joint filer, the amount is $4,800. There's an additional exemption of $1,200 for those over 65, $1,200 for those legally blind and $1,200 for those disabled and under 65. In addition to this benefit, they also have no sales tax.

Tennessee

Tennessee doesn't impose a tax on W-2 income either but only one on income from dividends from stock and interest from bonds and notes. You only pay the 6 percent tax if your income from those sources is more than $1,250 for singles and $2,500 married filing jointly. If you're over 65 and have an income less than $16,200 filing single or $27,000 filing jointly, you also receive an exemption from the tax.

Illinois

Illinois has a flat tax rate of 3 percent of federal adjusted gross income. While some states have a graduated tax rate that's less on the smallest percent due than Illinois, they exceed the rate on the highest percentage due.